In February, Hedgeye Financials Sector Head Josh Steiner warned that the positive data coming out of the labor market regarding employment would not last forever. Week-after-week of positive data that beat expectations was unsustainable and the seasonal-adjustments that were acting as a tailwind for the data would become a headwind by late March/early April. Sure enough, this week's ADP employment report, initial jobless claims and non-farm payroll numbers were nothing short of disappointing.
On February 28, Steiner wrote:
"The end of February marks of the peak of the seasonality distortion tailwind. Next week will mark the final tailwind datapoint. Then, beginning in March, we'll start to see the effect reverse and the market's perception around the momentum in the labor market will begin to weaken and ultimately will turn bearish as the reverse effect peaks in August."
You can see in the charts we've included in this note that the labor market is now bearing the brunt of the seasonal-adjustment headwinds. Don't expect any meaningful recovery in the labor market, save for the occasional weekly surprise, until Labor Day weekend.